How to Plan Your ERP Budget

7th August 2013

Before you even begin a pitch to your executives about a new or replacement ERP system you should have a pretty good grasp of your ERP budget. What will it cost? And, what returns can be expected? As you move along your path towards that shiny, new ERP you will refine those numbers. The boss wants you to be able to enter an order accurately and easily. But, even more, they want to make a profit.

101 Costs

The first cost is the software itself. You probably can find guesstimates online. You can contact the ERP vendor too but this might be early until you have defined your needs somewhat. This is whether you intend to purchase the software or rent it as SaaS. Some provide complete systems for a single price and others offer separate modules. Most will have options at additional cost.

Will you need any other software too? Almost all systems provide inventory management but not all provide complete warehouse management. These systems usually can work together but you might need translation software between them.

Will the project require improved servers and networks? Get some numbers for these needs too. Don’t forget that users’ desktop computers might need beefed up and that some will need remote connections. Will your plan require wireless connections inside the facilities or remotely?

The money will flow out for months or maybe years. Then you hopefully will see the benefits begin to flow in.

Your ERP system will last for years. Your vendor will have an ERP maintenance plan to keep you up to date with the latest improvements and bug fixes in their software. Understand how the plan works and what it will cost for the life of your ERP. Hardware and networks have a lifespan too. Some parts will wear out and others will become technologically obsolete and in either case this will bump up the outgoings in your ERP budget.

The implementation will cost money too. Your people will need to work on the ERP implementation project and might need to be supplemented while they spend time on ERP when their other jobs still require attention. There will also be outside costs from experts and other consultants which you must factor into your ERP budget.

The money will flow out for months or maybe years. Then you hopefully will see the benefits begin to flow in. Work out a time phased plan showing your expected cash flows and your expected expense and income flow from the financial statements.

Now you can present a budget and begin to get the OK for your plan. You can get better numbers as the plan moves along. At the end, you will review the actual numbers and show how well the ERP is working and how much value it brings to your business.

Tom Miller

About the author…

Tom completed implementations of Epicor, SAP, QAD, and Micro MRP. He works as a logistics and supply chain manager and he always looks for processes to improve. He lives near San Francisco Bay in California and can be found on the water in his kayak or on the road riding his motorcycle. Contact Tom at customerteam@erpfocus.com.